No bailout for carmakers

The European Union’s industry ministers have promised to speed up access to finance for Europe’s troubled car industry, but reaffirmed that there would be no bailout to help the industry through the slump.

“The main responsibility is for the automotive sector itself. It has to shoulder this responsibility. It has to invest in new technology. It has to deal with structural problems. It has to deal with overcapacity,” said Martin Říman, the Czech industry minister who chaired the meeting.

The ministers agreed that access to finance from the European Investment Bank had to be made simpler and faster. The European Commission and the European Investment Bank are to report to the economic summit of EU leaders in Brussels later this month (19-20 March) as to how they could speed up the industry’s access to finance.

The outcome of the industry ministers’ meeting had been largely pre-empted by Sunday’s informal summit of EU leaders at which they agreed not to get into a state-aid race.

But beneath the official condemnation of protectionism, tensions remain. Luc Chatel, the French industry minister, wanted to go further to support the industry. He argued in vain for co-ordinated action to stimulate consumer demand and a harmonised scrapping scheme.

Chatel had some success with his call for greater use of the globalisation adjustment fund, an allocation of EU money to help companies at risk when production moves out of Europe. Ministers agreed that the Commission must make “better use” of the fund, said Říman

The industry ministers’ meeting was preceded by more gloomy statistics from the car industry: the European carmakers’ association (ACEA) said yesterday that car production was likely to fall by 25% in 2009, while sales would fall by 20%. Earlier this week the US company General Motors warned that its European operations could collapse within weeks without help from European governments. GM plans to dispose of its Swedish brand Saab.

Maud Olofsson, Sweden’s deputy prime minister, said General Motors had failed to invest in Saab: “GM hasn’t been a good owner. They [GM] haven’t developed new cars, they haven’t developed new technologies and this has been a problem for Saab,” she said yesterday.

Günter Verheugen, the European commissioner for enterprise and industry, accused GM of failing to be transparent in its dealings with Europe, although he declined to go into specifics. “The way the American mother company is dealing with the issue in Europe is not acceptable,” he said.

Verheugen also warned that Europe would see social unrest, if politicians failed to explain why companies in the real economy should not get bail-outs, when banks have received billions from the taxpayer. He said that social unrest would result “if we cannot clearly explain the difference of the systemic importance of the financial sector and the rest of the real economy”, adding that “everyone should be aware that the problem is potentially explosive”.

“Not a single company would create a collapse of a nation…It is completely different for certain financial institutions. If they collapse the whole economy would collapse with them,” he said.